If you are a grown-up person, or if you are the parent of non-grown-up persons, now is an important time to be learning about the world. Now you may think that this isn’t your first rodeo. What more do you really need to know about life. Well, if your finances aren’t where you want them to be, you probably have a lot to learn. This can be hard to hear from grown up people. I sympathize. Like you, I like to feel sure of myself, confident that I’m a man with a plan and a future. But the fact is, without real knowledge about personal finance, your money life isn’t going to go anywhere good. Unless you are learning, and never stop learning, it’s likely that your financial life will screech to a halt. Here’s how to make sure it does no such thing.
- Evaluate Your Spending. Being a financially educated adult often has more to do about awareness than knowledge. It’s about running your finances, not having your finances run you. The average adult and/or family life is rife with financial waste. It’s just the way things are. Most of us know this deep down, so we’re scared to look at our finances with a microscope, afraid of what we’ll find. I’m here to say that this process is worth it. Sure, there may some arguing and even some tears, but you’ve got to know what you’re spending and where, relative to the money you are making. This is the first step to developing a real, working budget.
- Plan Your Spending. Now that you know what you can spend, you’ve got to stick to it. If you are in a partnered relationship, make sure each partner knows how much to contribute, and for what purpose. Make a list, make a spreadsheet, carve it in stone, whatever! But make it communicable, and stick to it. If you can handle points 1 and 2, you’ll be a lot farther than a lot of “financially educated” people.
- Save For Tomorrow. You can save for all kinds of purposes, but the best immediate savings goal of them all is saving for the unknown! The unknown will almost always manifest itself as some form of emergency. I recommend that people have 6-12 months of normal expenses saved up in a high-interest savings account. This is an incredible buffer against the unknown. There will be many times in your life when you will just need money. It will help you so much if you already have some on hand. At the very least, you’ll sleep a little better at night.
- Invest In Your Future. Investment can take many, many forms. Some of my favorite are real estate, and mutual funds/ETFs. Each of these scratches a different investment itch. You’ll want to have some skills before you start to invest real dollars. Real Estate, especially in the form of your own home, is a great way to build equity and meet your most immediate needs for the next several years. Mutual funds and ETFs can provide a payout for many decades to come, even into retirement.
- Make it a Hobby. Start to enjoy yourself with your investment plans. It’s easy once you start to have a little extra money left over every month. Read and learn, converse and listen. Make financial learning a habit, and one that you really enjoy.
If you follow these 5 steps, you’ll not only learn a lot about money, you’ll put yourself in better financial standing than you’ve ever experienced in your life. This is a great thing to do as an adult, and to pass on to your children, no matter what age you are.